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Self-employed retirement accounts allow $60K-$69K per year in tax-deferred contributions. The most powerful tax shelter available.
$69,000
Solo 401(k) Max
2024 (under 50)
$69,000
SEP IRA Max
25% of net SE income
$15-25K
Tax Savings
Annual tax reduction
$50K/year Contributions at 8% Return
Head-to-Head Comparison
| Feature | Solo 401(k) | SEP IRA |
|---|---|---|
| Max Contribution | $23.5K + 25% profit | 25% of net SE income |
| Catch-Up (50+) | +$7,500 | None |
| Roth Option | Yes (Roth Solo 401k) | No |
| Loan from Account | Yes (up to $50K) | No |
| Setup Complexity | Moderate (more paperwork) | Very simple (1 form) |
| Employees Allowed | No (solo only) | Yes (must cover all) |
| Best For | Max flexibility, higher income | Simplicity, has employees |
Solo 401(k) = $23,500 (employee) + 25% × (Net SE Income − ½ SE Tax)
Two buckets: employee deferral ($23.5K fixed) + employer profit-sharing (25% of adjusted net)
Example: $150K Net Profit
Choose Your Plan
Solo 401(k) if no employees and want Roth/loan options. SEP if you have employees or want simplicity.
Open by Dec 31
Solo 401(k) must be established by December 31 of the tax year.
Contribute by Tax Filing
Employer contributions due by tax deadline (April 15 or Oct 15 with extension).
Invest in Index Funds
Same as any retirement account. Target date or 3-fund portfolio.
File Form 5500-EZ
Required when Solo 401(k) balance exceeds $250K. Simple one-page form.
SEP IRA Deadline Exception
Key Takeaways